Reports that American Airlines, the world's largest carrier, is preparing for the possibility of bankruptcy have sent a chill through the aviation world. A combination of terrorist attacks, the shadow of war with Iraq, rising fuel prices and falling passenger levels has hit airlines hard, with British Airways shares plummeting to their lowest level ever last week.

With the very real prospect of major airlines going bust, it does not hurt to remind ourselves what protection the consumer is offered by airlines in the event of collapse. It's quite straightforward: none.

Most of us now know to look for the Abta logo when booking a package holiday, as a guarantee that our money will be safe and we won't be stranded abroad should our tour operator fail. Some of us may even be aware that if we book our airline tickets through a tour operator or a flight-only specialist which holds an Atol (Air Travel Organisers' Licence) we will be protected. But when it comes to booking a flight direct with an airline, either by phone or on the internet, no four-letter acronym is going to save us.

It's a major loophole in consumer protection and one which groups such as the Air Transport Users' Council have been fighting to close, with little success. All they can do is remind us that the responsibility for making sure we are covered lies with us, the customers.

The ways of doing this are to book on your credit card (only applies to transactions over £100); buy a travel insurance policy that covers you against airline failure (some do, some don't, check the small print); or book your flight through a tour operator or flight specialist which holds an Atol.

The recent Ryanair takeover of Buzz highlighted yet another loophole. When Ryanair axed certain Buzz routes, passengers who had booked and paid upfront for accommodation or car hire through the Buzz website were left in a bit of a fix. With no means of getting to their destination, they may have felt justified in believing that the airline owed them some kind of compensation other than a refund for their flight. They would have been wrong. If you book a flight, a hotel or, say, car hire through an airline's website, it may look like a package and feel like a package but under the terms of current regulations it is not classified as a package and you are not covered for losses incurred if one of the elements of your holiday - in this case the flight - goes belly up.

The current legislation governing airlines' liability is badly out of date. This is largely because the Atol regulations were drawn up in the 1970s when airlines didn't go bust (because they were state-owned) and when people mostly travelled on package holidays. Times have changed. Airlines do go under (as illustrated by Swissair last year) and the internet has encouraged people to put together their own holiday arrangements. Until legislation catches up with the changing face of the travel market, the onus is on us to make sure we don't end up out of pocket.

· The Civil Aviation Authority will publish a leaflet next week on bonding for air travel and package holidays. See www.atol.co.uk.